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A dusty settlement on the outskirts of the Iraqi capital Baghdad, Al-Rustumiya is more a collection of rags, rubble and garbage than a neighbourhood - and yet its residents wish for no more than to be able to stay here.

Squatting illegally on government land, they are under constant threat of eviction, but say they cannot return to their places of origin.

"You can't just leave us in this instability," Abu Ahmed, a representative of the settlement, told a delegation from the UN Refugee Agency (UNHCR) which visited the settlement in July. "We don't want anything from you - just stability."

The most important thing, he said, was permanent housing - "anywhere".

More than 100 families have lived on this land, owned by the Ministry of Defence, since 2006.

They have been displaced several times over the decades - first as a result of former President Saddam Hussein's Arabization policies in disputed territories; then in a 2003 move by Kurdish authorities to drive Arabs out; and most recently by Iraq's sectarian conflict of 2006-7. For now, they have found safety here, where they live one family to a room, in abandoned houses they found or homes they built by hand with mud.

"I do not belong to any place in Iraq," said one resident of the settlement, as he swatted flies from his face. "We don't feel the government is supporting us."

Summer temperatures can exceed 50 degrees Celsius here, yet there is no electricity. Stagnant water lies in ditches along the pathways and residents tap water illegally from the public network. Most families have one breadwinner - usually a son who makes 15,000 Iraqi dinars (less than US$13) as a daily labourer - enough to barely feed the family (meat and fruit are rarities) but not enough for medical care when a family member falls sick. One senior aid worker described the conditions of some of the displaced as comparable to those in Sudan's Darfur Province.

Yet all of this, the residents say, they can handle: "Our only problem is housing."

Some four years after the civil conflict died down, more than 1.3 million Iraqis are not living in their homes. Many of them are in a state of limbo, while bureaucracy and a lack of vision slow progress towards long-term solutions.

"From time to time, Ministry of Defence employees come riding horses to remind us this is their land," said Khalaf Ghaith Hussein, another community leader.

"We still feel, until now, that we are displaced," Abu Ahmed said. "We are not stable."

While there is some degree of acceptance by local communities of the displaced people, a more secure Iraq in recent years has increased the pressure for long-term solutions. But the residents here say their area of origin - contested Diyala Province - remains too unstable to return to. Besides, most of them owned no land there.

"If evicted, where can I go?" said one resident, sitting on the floor of his furniture-less home, fanning himself with cardboard. "I will buy a tent and find a place to pitch it."

UNHCR and the International Organization for Migration (IOM) say 90 percent of people displaced by the recent conflict want to integrate locally in their areas of displacement - either because sectarian tensions have prohibited their return or because they have nothing to go home to.

Those who fled to the autonomous Kurdish region in northern Iraq have settled there, in some cases, seemingly permanently, even changing their identification cards to read "Kurdish" instead of "Arab". But nearly half a million others continue to eke out an existence in 382 settlements across Iraq and observers say the government has no real strategy to deal with them.

First steps

A new pilot project by UNHCR aims to take a first step.

Last month, it started levelling land in Baghdad's Sabea Al-Boor neighbourhood, where it will build proper housing units for 700 of Baghdad's displaced, including some from Al-Rustumiya. The first bricks are to be laid this week.

UNHCR obtained the land from the Ministry of Defence after two years of drawn-out negotiations with various ministries. It will belong to the displaced for 15 years, at which time they will then have to renegotiate contracts with the government.

But this step - long delayed by bureaucracy - is a drop in the ocean. UNHCR says it will take more than 10 years for all of the settlements to be converted in line with this model.

The deputy minister of displacement and migration, Salam Dawod Al Khafagy, says several other plots of land are in the plans, but: "It takes time. To get a permit for a plot of land is not easy at all. It's very complicated. It involves more than one ministry and more than one department," he told IRIN. Coordination between government bodies, he admitted, is "not at the level we would like." Aid workers say the displaced often end up neglected, caught between government bodies passing the buck and local district councils that do not want to encourage them to stay.

Closing the file

The government would like to close the file for internally displaced persons (IDPs) by the end of the year, proposing to offer registered IDPs four million dinars ($3,430) if they return to their homes and 2.5 million dinars ($2,145) if they integrate locally or move permanently to a third location. Increased numbers of Iraqis returned from both internal and external displacement in 2011.

But aid workers say the compensation is not enough to build a sustainable future. Even at the current rates, the Ministry has had to put the integration grants on hold for lack of funds. It says its current focus is on Syrian refugees crossing into Iraq and Iraqi refugees returning from Syria.

There are other factors that further complicate the picture: Many IDPs are not registered with the government either because the process was too complicated or badly explained, or because they did not meet the narrow criteria for registration. Others, who are registered as IDPs elsewhere, can really no longer be considered IDPs, having become self-sufficient, with access to health care, education, livelihoods, and documentation. Still others were never IDPs, but migrated to Baghdad, and have ended up in settlements due to their socio-economic status, contributing to a growing urban problem.

And as Iraqi refugees in now conflict-ridden Syria increasingly return home, some could find themselves in similar conditions - lost in a country with a government that already has many problems on its hands, and where, observers and former bureaucrats say, officials are appointed based on patronage not competence.

As Abu Ahmed put it: "Because of the unstable situation in all of Iraq, no one is making a decision about us."